Over the last few days we published the articles Turkey - A Study In Keynesianism and Singapore - A Study In Free Markets where we provided an insightful, in-depth and comprehensive analysis of the methodologies and consequences of following the Free Market philosophy or the Keynesian non-philosophy.
No. Not really.
We simply took one real-life example of each method and showed you what happens in real life, redundantly redundant.
Today, in an absolute feat of unmitigated herculean effort (well… at least in our imagination…) we will compare the two (i.e. we will re-hash the same info) for your own benefit and education (i.e. because we are lazy and left a few things out by mistake in the previous articles).
Look, we know that the previous two articles were a little bit long winded and somewhat boring. We get it. However, there is an important lesson to be had here. Therefore we will provide you with direct comparisons so that you may better understand why we favor the Free Markets. We will attempt to do so with a minimum of words as one picture… blah… blah… blah… you know the rest. Lets's doo…ooo….it!
This entry shows, in essence, what happens when a Central Bank manipulates currency "for the greater good" versus what happens when a Central Bank just goes with the flow and only attempts to smooth-out the rough edges.
As you can see, the TRY is a very unstable and a very debased currency while the SGD is not. In Turkey you never know how much you will be able to buy tomorrow, while in Singapore you always do.
Imagine the following scenario: the money in your bank is worth less and less every day, your wages are frozen, prices are going up and up, you can't afford to have a house and rent forever, you can't take a vacation, you can't afford good food, you can't afford decent clothing, you can't change your decrepit and dying car for a normal one… and so on… Do you like this scenario? This is Turkey. This is what happens when government mess around with the optimized system that free markets are.
Now imagine this scenario: the purchasing power of the money in your bank is growing slowly but steadily, your wages are going up, prices remain the same or they go down or up just a little bit, you can buy a house, go for a vacation, eat good food, have decent clothing and a normal car… and so on… Do you like this one then? This is Singapore. This is what happens when governments stay away from the free markets and allow then to perform at their best.
This entry shows, in essence, what happens when governments create money out of thin air to pay for "expenditures" and to "stimulate" the economy. Basically? Debacle!
As you can see, Turkey's inflation has been out of control between 1968 to 2004. Since 2004 it has more-or-less stabilized at around 8%. This means that on average, Turkish people are losing 8% of the value of their currency per year. Every year. Year after year after year… while they pray it doesn't get worse. And have they gotten an increased economic activity for all that "good" inflation (as Keynes recommends)? Not a chance in hell… take a look at the next chart.
We can ask the same for Singapore? Have they obtained a subdued economic activity as a consequence of a lack of inflation? Not a chance in hell… take a look at the next chart too!
GDP PER CAPITA
This entry shows, in essence, the accumulated wealth (per person) over time. Not the greatest measure (never forget that GDP Keynessians Vodoo Economics) but for comparison purposes it will do.
Take a look at the anemic wealth accumulation of Turkey versus the robust and continuous Singaporean trend. Take a look at the difference in GDP per person in 2017: "only" 50,000 USD!!! This is the difference between free markets and manipulated markets. If you could choose one of these two growth curves, which one would you choose? We hazard a guess that you would take the Singaporean one, not the Turkish one… this is a no-brainer. But if you would do that in a theoretical comparison such as this article, why won't you do it in real life? Why do you continue to support a democratic system that consistently delivers such lousy economic performance while in control of all economic mechanism? Why? Ask yourself this question.
Note: please see the Glossary if you are unfamiliar with certain words.